President Donald Trump ran for the White House with a promise to overhaul our tax system. He specifically said his plan would provide a huge tax cut for most Americans and a simpler, fairer system that would erase loopholes for the wealthy and restructure corporate taxes to create millions of good jobs.
When it comes to tax relief, principles of what Trump preached in his campaign are what he should fight for now. Tuesday, though, he will lobby Republican senators to vote for a tax plan that looks almost nothing like what he pledged and which would cost many of his supporters dearly.
At the heart of Trump’s “tax reform that will make America great again” plan was a promise that single people earning less than $25,000 and married couples earning less that $50,000 would pay no federal income taxes. These 75 million households would simply send a one-page form to the IRS saying, “I win,” the plan promised. The higher limits would have been an amazing boon for those struggling to get by and would have created a larger deduction than itemizing state and local property taxes does for the vast majority of taxpayers, even on Long Island.
But the Senate plan Trump is pushing would sets the limits at about half that level, and also eliminate the $4,050 exemption for each person. There wouldn’t be many more households not paying federal taxes under the proposed plan than there are now. And it would eliminate the ability to itemize deductions for state and local taxes.
On the campaign trail, Trump said, “It would be a dream of mine to put H&R Block right out of business.” He promised to reduce the number of tax brackets from seven to four — of 0 percent, 10 percent, 20 percent and 25 percent. The Senate plan Trump is twisting arms to pass, though, would keep seven brackets with rates very similar to what they are now.
Trump’s populist credentials also shone when he promised to end carried interest, the tax provision that lets already affluent hedge fund traders and venture capitalists who earn their salary and bonuses from these investment vehicles pay at the very low capital gains tax rate of 23.8 percent, rather than the top personal income tax rate of 39.4 percent. This bill he is promoting would do no such thing.
In fairness, Trump’s campaign tax plan never could have passed, because it proposed cutting corporate and personal rates so drastically that revenue would have plummeted, crucial services could not have been funded, and the deficit would have exploded. Some hyperbole is allowed, but the plan he is fighting for now makes all the wrong choices. It would slash taxes on corporations and the business vehicles and estates of the very wealthy while doing very little good, and in some cases much harm, to middle- and upper middle-class households, especially on Long Island. It would not simplify the maddening process of filing. It would not stimulate the economy much. Most establishment Republicans Trump ran against with his popular message are eager to pass it, even though polls show voters disapprove of it by 2 to 1.
Trump ought to stop fighting for this swamp tax plan, designed to benefit the ruling class, and go back to fighting for the middle class.
— The editorial board